By Michael D. Bird, CFP®, MBA
One of the questions that clients ask occasionally is for my recommendation on a book to read. Most of the books that I read are highly technical and cover advanced financial and accounting concepts, but there are some that a lay person might read and be able to apply to their lives.
The first really influential book that I read is an old one entitled William E. Donahue’s Guide to Finding Money to Invest. Some of the information is outdated, such as using money market funds as a “way station” for cash. The strategy is now different, because money market funds pay next to nothing and will continue to pay very little until interest rates improve. I don’t expect interest rates will increase anytime soon, but the book did get me to thinking. A good on-line savings account is a better strategy now or even a local credit union. The emphasis of the book was to find ways to make money work. And that led me to many ideas. This book is probably out of print, but I mention it because it taught me that saving some of what I earn leads to making money work, instead of just working for money. If you want a good, general book, try Dave Ramsey’s The Complete Guide to Money.
Another good book is by an author who normally writes for financial advisors, Nick Murray. He wrote a book for the investing public called Simple Wealth, Inevitable Wealth (revised Third Edition). In it, he describes a process to build wealth that is simple, but not easy. It’s about investing regularly (monthly) and letting your managed investments work. I write “managed investments” because the author specifically excludes individual stocks. One of the analogies that is most helpful is that of planting a tree. When you plant a tree, you do everything possible to make sure it is in the right spot, gets the right amount of sun, etc. You do not dig it up every three months to see how the roots are doing. Or throw it out because it hasn’t grown enough. Instead, you let the tree grow at its own pace. That is the essence of investing. As Warren Buffett is quoted in the book, “Somebody’s sitting in the shade today because someone planted a tree a long time ago.”
If you want to understand investments more deeply, William Bernstein wrote The Intelligent Asset Allocator. The book starts with some math concepts, but he explains it in a very straight-forward, easy to understand way. At least most people think so. You need it to understand the basic concept of risk, and if Nick Murray’s book didn’t go into as much depth as you would like, this one does. In the financial world, risk is defined by how much an investment moves up and down. Think of a yo-yo; it goes up and down. The financial world measures that movement, and an investment that moves a lot is considered risky. Why? Because when it goes down, human emotion has a tendency to kick in, and people decide to sell. Mind you, selling when an investment is down is the worst time to sell. Understanding that it is normal for investments to rise and fall will make you a better investor. Bernstein’s book helps with that understanding and with some basic strategies.
The ultimate investment book would be Benjamin Graham’s The Intelligent Investor. Warren Buffett, probably the greatest investor ever and still alive today, has written that it is “by far the best book about investing ever written.” Originally written in 1949, Buffett read the book back in the 1950’s. But again, it might be hard reading. There is an edition in which Jason Zweig summarizes each chapter in a more understandable tone. In the investment world, when you hear people talking about “Mr. Market,” they are referring to a short analogy in Chapter 8; it’s timeless and forever we will probably see references to “Mr. Market.”
What if you don’t like to read? On-line there are innumerable courses, classes, webinars, videos, etc. that you could investigate for general information. Some of the courses can be rigorous. Some are very salesy. Some are too simple. Some are free and some are not. What you can find is a wealth (pardon the pun) of information at your fingertips and at your own timing. The courses range from very simple to more complex. I am currently taking a course on advanced portfolio concepts through Rice University. The course is very rigorous and yet very helpful. And very inexpensive. Kahn Academy has lots of information and is absolutely free. There is a world of course-work available if courses are better than trying to teach yourself.
Whatever you do, you should find many resources available without a lot of cost. There is no reason to spend a lot of money trying to educate yourself when you can buy books, see webinars, enroll in courses, and generally, find information about any topic. The question is what level of interest you might have. That’s harder to determine. Maybe you want to just understand some terminology or basic concepts. Or maybe you have a question about savings and budgeting.
There is an educational opportunity for you in whatever interests you. But don’t forget your financial advisor. He, or she, should be willing to educate, not pontificate. There is a thin line, and most advisors really want to do a good job. But sometimes the jargon is too easy to use and, for the lay person, confusing. He, or she, could be a starting point for you to recommend books, courses, or sources of information. If they won’t, then it’s time to learn on your own. And if you learn enough, you may find that doing that is more rewarding either emotionally or financially! It’s just one additional way to improve your wellness!
Michael Bird, a Financial Advisor with Secure Money Masters in Bristol, TN, is also an adjunct Professor of Finance and has taught at several universities and colleges, including ETSU, Belhaven College and the University of Memphis. He currently teaches a course on Social Security and how to integrate Social Security benefits with Retirement Income.
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